Dan willingly admits that he is not an accountant by training, He is concerned that his balance sheet might not be correct. lie has provided you with the following additional information.
1. The motorcycle actually belongs to Jasper, not to Julius Corporation. However, because he thinks he might use it to visit customers occasionally, he decided to list it as an as¬set of the company. To be consistent he also listed as a liability of the corporation his personal loan that he took out at the bank to buy the motorcycle.
2. The truck was purchased for only $18,000, even though Dan knows its "sticker prices was $20,000. lie thought it would be best to record it at $20,000.
3. Included in the accounts receivable balance is $8,000 that Dan expects to collect from a customer for a sale that he anticipates will occur in January. Dan included this in the receivables of Julius Corporation because he has already discussed the potential sale with the customer.
Instructions
(a) Comment on the proper accounting treatment of the three items above.
(b) Provide a corrected balance sheet for Julius Corporation. (Hint: To get the balance sheet to balance, adjust stockholders' equity.)
| Assets |
|
Liabilities and Stockholders' Equity |
|
|
Cash
|
$20,000
|
Accounts payable
|
$40,000
|
|
|
39,000
|
Notes payable
|
15,000
|
|
Accounts receivable
|
|
Motorcycle
|
17,000
|
Motorcycle loan
|
14,000
|
|
Truck
|
20,000
|
Stockholders' equity
|
27,000
|